Monthly Archives: May 2015

What are Capital Gains Exclusions and how do they help homeowners?

Fast Fact: Building home equity is how many Americans are able to save up money — thanks to a capital gains exclusion on home sales. Without it, many couldn’t even save for retirement.

tax-matters

Not long ago, if you sold your home, you’d have to pay taxes on any profit, which can be a significant chunk of change.

For most folks, the only alternative was to buy a more expensive home. But what if the whole point of selling was to cash out that home equity so you could downsize and cut back?

Congress realized this was a problem and came to the rescue with the Taxpayer Relief Act of 1997, which included the capital gains exclusion for people selling their homes.

HOW DOES THE ACT HELP HOMEOWNERS?

The Act allows you to sell your primary residence and save up to $250,000 of those sale proceeds ($500,000 for married couples) without having to pay capital gains tax to the IRS. The only requirement is you need to live in your home for at least two of the five years before you sell it.

Over time, the Act has been modified to help homeowners who needed to sell their homes, before that time period, because of changes in employment, health, marital status, or other unforeseen circumstances.

So you can see how the capital gains exclusion helps sellers build and preserve their savings, particularly those nearing retirement.

HOW MUCH HAS THE ACT HELPED?

Americans were able to set aside an estimated $86 billion in savings over the past four years, thanks to the capital gains exclusion — even with a tough job market and slow economy,

But the exclusion also helps home buyers. Knowing they’ll be able to keep their sale proceeds without paying a hefty tax encourages many homeowners to sell, which increases housing inventory while creating more choices for buyers. That, in turn, helps keep housing prices affordable.

Particularly now, as more and more of us are facing a hard time earning, saving, and retiring, we all need to tell Congress “hands off” the capital gains exclusion for homeowners!

More on this topic



Alaska REALTORS® Protect Private Property Rights

Ensuring that private property owners’ rights are protected in Alaska, where only 3 percent of land is privately owned, is a constant priority for the Alaska Association of REALTORS®.

After a 2005 United States Supreme Court case that expanded the constitutionally permissible uses of eminent domain to include economic development and raising government revenues (Kelo v. New London), the Alaska Association of REALTORS® supported legislation to prohibit the state from using its eminent domain power to take property for recreational purposes, such as playgrounds, parks or sports facilities.

More difficult work came after that victory. The Alaska Association of REALTORS® soon recognized that the legislation they supported left an important group of property owners unprotected: owners of recreational structures. Recreational structures are defined as permanent structures used seasonally; for example, a fishing or hunting cabin. Over time, many of these recreational structures end up as primary residences, either when they are sold or when their owners retire. It is common for Alaskans to have recreational property they use seasonally but then move into permanently upon retirement.

Through a multiyear effort that included testimony before the state legislature, the Alaska Association of REALTORS® helped pass changes to the law that expanded the eminent domain protections to include recreational structures. Now, the state is prohibited from taking recreational structures or residences for recreational purposes.

The rights of private property owners in Alaska have been strengthened by the efforts of the Alaska Association of REALTORS®.

California REALTORS® Promote Tax Relief for Modified Mortgages

Many California homeowners who have had difficulties making mortgage payments in recent years have used loan modifications to try to keep their homes. The modifications, however, often did not end their difficulties due to California tax law. In response, the California Association of REALTORS® made it a priority to get the law changed so these homeowners could be protected.

Many mortgage loan modifications reduce the principal that a borrower owes. Federal law provided that the amount of the reduction would not be classified as income; but California law said otherwise, and borrowers who thought they had found financial relief were faced with a larger state income tax bill.

The California Association of REALTORS® worked hard to support legislation that would stop this unfairness. Assembly Bill 1393, sponsored by Assemblyman Henry T. Perea (D-Fresno), made California law conform to federal law. Borrowers who had part of their mortgages forgiven would no longer be taxed on the amount forgiven.

The new law, signed by Gov. Jerry Brown in July 2014, was effective immediately and applied to all mortgage-principal reductions made during the 2013 tax year. The state of California estimates taxpayers will save $39 million as a result of this law.

This action is just one of the many ways that the California Association of REALTORS® works hard behind the scenes to keep apprised of, and act upon, current law or proposed legislation so that California homeowners don’t have to.

Fargo-Moorhead REALTORS® Search for Flooding Solutions

When flooding occurs on the Red River of the North, you can find members of the Fargo-Moorhead Area Association of REALTORS® on the front lines, helping with emergency responses and efforts to find long-term solutions.

Homeowners in the Fargo-Moorhead area of North Dakota have been victims of devastating flooding almost every year since 1993. In fact, the Red River of the North has exceeded flood stage in 49 of the past 110 years. On top of the devastation that comes with a flooded home, homeowners face higher insurance premiums and a difficult seller’s market.

The Fargo-Moorhead Area Association of REALTORS® is not content to sit back and wait for others to find solutions.

“The years we have had flooding, our members were front and center, sandbagging to help protect our city,” said the Association’s Executive Vice President Marti Kaiser. “Association staff and volunteers made lunches and brought them out to volunteers. REALTORS® protect their communities.”

Behind the scenes, an Association member has served for some time on a local flood task force that has actively studied the flooding problem in an effort to protect homeowners. After some study, the Association decided to support a recommended diversion program that would channel floodwaters around Fargo.

“REALTORS® have a vested interest in the community they serve,” Kaiser said. “Our members studied the issue, listened to both sides, and decided to support the diversion,” finding it the best solution to a long-term problem.

The Association has not only contributed to the flooding solution, its members are ensuring that homeowners get accurate information.

“REALTORS® are in close communication with lenders and insurance agents in order to pass along the most relevant and accurate information regarding flood insurance to buyers and sellers,” Kaiser said. “We use Facebook, Twitter and a variety of other methods to make sure homeowners have the information they need.”

The Association is also working with the national Coalition for Sustainable Flood Insurance, to help find a solution to flood insurance’s staggering costs.

The Fargo-Moorhead Area Association of REALTORS® works hard to help find such solutions because it’s the best way to keep its community safe.

Las Vegas REALTORS® Win Fight Against Proposal That Would Have Hurt Homeowners

When the Greater Las Vegas Association of REALTORS® stepped in to prevent the city of North Las Vegas from adopting a dangerous proposal from a private company, it knew that the outcome would have reverberations across the state.

The private company, Mortgage Resolution Partners, had embarked on a campaign to get cities across the nation to use the power of eminent domain to take homes that were worth less than the mortgages on them and then sell them back to homeowners at a reduced price. The North Las Vegas City Council initially welcomed MRP’s idea, believing it offered a means of helping distressed homeowners while also helping the city’s housing market.

However, the Greater Las Vegas Association of REALTORS® immediately recognized the risk of this proposal and fought hard to stop it.

The plan targeted homeowners who were up to date on their mortgage payments. These homeowners would have been subjected to a foreclosure/sell-back process without their consent. MRP would have served as a partner to the city, making money off of the takings. The plan was likely illegal and unconstitutional, and the White House, Congress, Fannie Mae and Freddie Mac expressed concerns over this use of eminent domain. The Federal Housing Authority even advised that it might stop lending in areas that adopted MRP’s plan. That move would have devastated the area’s access to mortgage credit, making it more expensive and difficult to obtain a mortgage.

The Greater Las Vegas Association of REALTORS® was the first group with the foresight to see that this proposal was a dangerous infringement on homeowners’ rights. It was also the first group with the courage to take a stand against the proposal. But, as it shared the plan’s downsides and risks, it quickly galvanized more than 22 partners in the fight.

The Association was equally successful in garnering community support. Through an informational website, commercials and door-to-door meetings, the Association educated the community about the proposal and people joined the fight in unprecedented numbers. Over 80 percent of homeowners approached by door-to-door canvassers signed postcards and petitions in opposition to the plan.

As a result of these efforts, the North Las Vegas City Council unanimously rejected the plan when it was reintroduced.

The Greater Las Vegas Association of REALTORS® is happy to report that, since the successful campaign, the area’s real estate market has continued to improve and Las Vegas is once again on track to being a premier place to live, as well as to vacation.

Wyoming REALTORS® Help Pass State’s First Fair-Housing Law

For the first time, Wyoming will have a law prohibiting discrimination in the rental, sale and financing of homes when the state’s new Fair Housing Act goes into effect on July 1, 2015. The new law was enacted thanks in large part to the efforts of the Wyoming Association of REALTORS®.

Without a fair-housing law, Wyoming homeowners, landlords and others involved in the home-sale or rental process were bound only by federal laws prohibiting housing discrimination. These laws provided protections for prospective renters and homeowners, in practice, but the complaint process was slow and ineffective.

Under the federal law, fair-housing complaints from Wyoming were directed to the regional Housing and Urban Development office in Colorado. Wyoming’s relatively few complaints per year often got lost in the bureaucratic shuffle, which slowed the resolution of those complaints and frustrated both the parties filing complaints and the parties responding to them. For example, one complaint took two years and approximately $20,000 in legal costs before it was dismissed as having no basis.

The Wyoming Association of REALTORS® had heard complaints for years about the existing system from the general public, people responding to complaints, and REALTORS®. The Association decided to act and began its successful push for the passage of a Wyoming Fair Housing Act. It galvanized its membership, lobbied legislators, and helped draft the Act’s language.

The Association focused on making the proposed Fair Housing Act politically viable, as a similar bill had failed to pass a few years prior. One of the legislative and public concerns that threatened to prevent the act’s passage was that it would unnecessarily add a new government agency and expenses to the state’s budget. REALTORS® developed a unique solution in response to this concern: Enforcement of the act will be conducted by either a state agency or a nonprofit agency funded through HUD grants. This provision allows the act to be revenue neutral and gives flexibility in its enforcement.

The Wyoming Association of REALTORS® believes that everyone, regardless of race, color, religion, familial status or other group membership should have equal access to housing for sale or rent. The Wyoming fair-housing legislation is an important first step that will help protect these rights and allow for quicker and more efficient resolution of fair-housing claims.

West Virginia REALTORS® Promote Energy Conservation to Cut Homeowners’ Costs

The West Virginia Association of REALTORS® has been working to promote residential energy conservation by advocating for the effective implementation of the state energy code.

In 2012, thanks to the advocacy of REALTORS® and many other groups, the state of West Virginia adopted the 2009 International Energy Conservation Code published by the International Code Council, and a 2007 American National Standard published by the American Society of Heating, Refrigerating, and Air-Conditioning Engineers. The international code applied to residential construction, and the ASHRAE code to commercial construction. The codes provided standards for energy efficient building and construction in all new homes and commercial buildings.

The energy codes also promised substantial savings for West Virginia homeowners. The REALTORS® Association estimated that compliance with the residential code would save the average homeowner $1,996 over the next 30 years.

Enforcement of the code also called for the training and continuing education of property inspectors, code enforcement officials, home inspectors, builders and architects. The REALTORS® Association is actively publicizing these training sessions to make sure the entire West Virginia housing industry will be able to comply with the new codes, and that consumers will reap the benefits of energy savings.

Ohio REALTORS® Work for Better Sewage System Rules

Sewage systems are a disaster when they fail, and very expensive to repair. The state of Ohio now has new rules for the repair and maintenance of sewer systems that keep costs to homeowners under control — thanks in part to the Ohio Association of REALTORS®.

Ten years ago, the Ohio Legislature responded to increasing concerns about sewage-system failures throughout the state by enacting legislation that put new rules in place for household and other small sewage systems. At that time, existing sewage systems that had been installed under laws enacted 35 years earlier — when far less was known about these systems —were failing at a dangerous rate. The Legislature wanted to take action to avoid failures that otherwise were almost certain to occur.

Five years after that legislation was passed, the Ohio Department of Health convened a rules advisory committee — which included a member of the Ohio Association of REALTORS®—to study the issue. The results of that study in 2012 found that 31 percent of that state’s sewage systems were failing when evaluated under existing laws. Clearly, something needed to be done.

New rules were proposed, but according to Carl Horst of the Ohio Association of REALTORS®, the original proposed rules would have placed onerous demands on property owners. The REALTORS® Association’s representatives worked with the health department, the federal Environmental Protection Agency, and various consumer groups to support rules that would allow homeowners to make effective, but far less costly, repairs than those required under the original proposed rules.

By working together — instead of battling one another — the groups were able to find common ground on how to correct the sewage-system problems without demanding such costly approaches. Finally, after four years of studies, discussions, public hearings and negotiations, the new rules took effect on Jan.1, 2015.

Under the new rules, homeowners benefit in three ways:

  1. By allowing a variety of time-tested and science-supported approaches, the rules put decisions about how to fix sewage systems in homeowners’ hands.
  2. By requiring the repair of faulty or failing systems, the rules will make sewage systems more sustainable for the long term, which, in turn, protects property values.
  3. Because the new rules express a preference for lower-cost, lower-maintenance systems that rely on natural soils for treatment, homeowners will spend less time and money.

Thanks to the work of the Ohio Association of REALTORS®, public safety issues around sewage systems were alleviated without putting an unfair burden on homeowners.

Des Moines REALTORS® and Foundation Support Housing Efforts

For 15 years, members of the Des Moines Area Association of REALTORS® have been supporting their communities through a charitable foundation that funds efforts to provide and improve housing opportunities.

In 2000, the members established the Des Moines Area Association of REALTORS® Foundation to support research and education about, and improvement of, housing opportunities for the Greater Des Moines area. The foundation is supported through dues and other donations from REALTORS®. Since it was established, the foundation has given nearly $400,000 to local charities.

Through the foundation, area REALTORS® are able to improve housing in a variety of ways. For example, in 2014 the foundation donated 125 fire alarms to the Des Moines Fire Department, helping to protect homes and the people living in them. In the same year, the foundation also helped support Hawthorn Hill, an organization that provides housing to homeless families with children.

The foundation has supported many other charities, including Children and Families of Iowa, a social services organization that helps families in crisis; the Ashley Okland Star Playground Fund, a campaign for a playground that will benefit children with cognitive and physical disabilities; and Youth Homes of Mid-America, an organization that provides residential and community-based treatment programs and facilities for at-risk youth.

The foundation’s president, John McRoberts, intends to continue its goal of funding housing projects and needs throughout the Greater Des Moines area.

Albuquerque REALTORS® Advocate for Homeowners on Water Policies

Rain Storm

A dramatic rain storm in Albuquerque, New Mexico.

Albuquerque, New Mexico, is a desert community with limited water resources. Sound water planning and regulation are vital to the city’s continued economic growth. Water policy has a particularly acute impact on the housing market, as water-related regulations and development decisions dictate the availability, affordability and desirability of housing.

The Greater Albuquerque Association of REALTORS® is involved with water issues to help keep housing affordable in Albuquerque.

The REALTORS® association has joined the Business Water Task Force, a coalition of real estate professional associations dedicated to ensuring access to clean and dependable water sources, and to the city’s continued growth and development — two goals that are not mutually exclusive.

The task force is closely monitoring a number of issues, including the city’s implementation of federal stormwater permit requirements and the Interstate Stream Commission’s study to update the area’s regional water plans. There is a risk that both of these efforts could be used as a way to stifle growth and development, which would make housing less available and, therefore, more expensive. Implementation of the murky stormwater permit requirements has also led to proposals to shift much of the burden to homeowners and developers by requiring the installation of costly stormwater monitoring systems on all properties.

With these concerns in mind, REALTORS® and the task force have gotten involved in the discussion of both issues. Four task force members currently serve on the regional water planning committee. A licensed attorney and engineer represent the task force’s interests at water-related meetings. REALTORS® and the task force also continue more traditional lobbying efforts that include communicating with local officials and helping to educate them on the impact of their decisions on homeowners and the real estate market. In all of these efforts, REALTORS® are using their voice to ensure that property owners’ interests are considered in the development of the region’s water usage plans.

Water issues will remain a crucial part of Albuquerque’s continued economic success, and will continue to impact area homeowners’ abilities to use and enjoy their properties. As water policy decisions are developed, the Greater Albuquerque Association of REALTORS® will continue working to ensure that water protection plans do not put an unfair burden on homeowners.